The Ultimate Guide for Running a New LLP in Malaysia

For those of you who are starting your very own micro business in Malaysia, a Limited Liability Partnership (a.k.a. Perkongsian Liability Terhad, PLT) is likely your best business model to start with.

I started mine about 1.5 years ago, and while I’m not a certified expert or anything — I’ve spent too many hours reading obscure documents by various government agencies to let it go to waste. This post covers the 5 Wives and 1 Husband on new LLPs in Malaysia. Who, What, When, Where, Why and How?

It’ll cover the “first cycle” of your new baby LLP’s life. Hopefully after you’ve gone through this first cycle, you’ll know what to do and just focus on running your core business smoothly.

Here’s the ultimate guide to starting your own LLP in Malaysia.

Why Limited Liability Partnerships?

Simon Sinek says great leaders start with “Why,” so we’ll start with that too.

If you recall what you learned in high school during Kemahiran Hidup, you’ll know that there are a few forms of businesses, each with their set of advantages and disadvantages. Of course, instead of listening to Puan Mariah, you were busy playing Command and Conquer with your pretty classmate Siti. So let me break it down for you:

Know why you never heard of Limited Liability Partnerships when you were in school?

No, it wasn’t because Siti was flirting back with you, (she was actually just bored). It was because LLPs didn’t exist back then. They’re a new type of business entity — and they’re fascinating. Here’s why.

The Concept of Separate Entities

Okay, I actually hate the word entity because it doesn’t bring up the image of anything in my head. WTF is an entity?

In layman’s language, an entity is a thing that is independent. So for example: you’re an entity, I’m an entity, and Ah Chong Auto Services where you service your car is an entity. But here is where it gets interesting: some businesses are separate entities from their owners.

Now this doesn’t feel natural. Maybe because we’re brought up with traditional values that businesses are made up of the people that run them. So if you think of Tesla, you think of Elon Musk. If you think of Virgin (not that one perv), you think of Richard Branson. If you think of Tesco, you think of the kind Nepali guard named Bishal who helped secure your plastic bag.

But the great thing about separate entity is it allows you to keep your personal life and business life separate. And allows for some really cool things — like say, for the company you created to continue living on even after you’re gone. Since it’s a separate entity from you — it doesn’t need you to be around. This is called continuity of existence.

Here’s another example: Rich Dad, Poor Dad author Robert Kiyosaki’s supposed bankruptcy. Some people have been saying recently, “Oh, he’s a fraud — if he knows so much about money, how come he can go bankrupt?”

He didn’t go bankrupt, silly. One of his many companies declared bankruptcy. Note the difference: Kiyosaki’s company declared bankruptcy, not Kiyosaki. And it probably hasn’t affected his wealth much. He’s likely got it all stored in other safe places.

But if he had been running a business that wasn’t a separate entity from himself (e.g. a sole-proprietorship), then yes — he’d be in deep shit.

Most of the time, starting a new business feels like this

Deep Shit vs Limited Liability

Just like in Kiyosaki’s case, there are always risks that business will go bad, and you need to make things right.

The lawyers call this liability, but I prefer to call it “being responsible for deep shit.”

The good news is there are business forms that protect you from going bankrupt even if your business does. And as you’ve probably guessed by now — a Limited Liability Partnership does exactly that (like the much more common Sendirian Berhads). At worst, you’ll lose all the money you invested into your business — but nothing more.

“Why not a Private Limited (Sendirian Berhad) company then? My friend says this is the best business format!”

Because Private Limited companies are expensive to start and more difficult to maintain (~RM 1,500 to start, ~RM 2,500 per year to maintain). If you have lots of capital though, they might make sense for you.

If you’re getting confused by my long-winded explanations, TL;DR: Choosing the correct business model can protect you and your money.

The Who’s Who of LLPs

Feel free to skip this paragraph if you’re an experienced business owner. If you’re a noob like me though — it’s important to understand who the players are:

We’ll get into more detail on what you need to do with each of these agencies, but the point I wanted to make is this: a one-stop portal/counter where you can do everything does not exist. You will be dealing with multiple parties — each with their own ways of doing things. So please don’t get upset when the counter lady gives you the classic Malaysian line: “Oh, ini kena pergi jabatan lain…”

Again, the above will seem painfully obvious if you’re already a seasoned Jabatan runner. But sometimes I have people asking me, “Why can’t I open a bank account for my LLP at SSM?”

Because they’re separate entities.

“But why not just run my side business quietly, don’t declare anything, and keep all the income? My friend’s aunt teaches tuition quietly and she’s damn rich! It’s the ultimate life hack!
F*ck the government. Hihi.”

Yes, I totally understand your desire to pay as little tax as possible, and there are completely legal ways to do that. But I also believe in running legitimate businesses that are properly registered. It’s the ethical thing to do. Besides, you don’t want to mess with LHDN. I hear they can mess your life up pretty bad.

When Do I Need to Do What (First Cycle)?

Here’s where it gets exciting. Because here’s where we talk about what needs to be done, and when.

SSM and LHDN make up the majority of this section — because they’re the two major government agencies that you’ll need to report to.

(I don’t have experience running a business withemployees, so my knowledge on dealing with the EPF and SOCSO is almost zero. If you know about that, and would like to add to this article — please comment below!)

3. Tax File

You can stamp your LLP agreement at any LHDN branch. It costs RM 10, and takes just a few minutes. Won’t go into detail on how to fill up the form here, but it’s really simple — just ask the helpful LHDN people at the counter.

Not sure how to do an LLP agreement?
Enquire here, or email my partner at info@axecute-consultancy.com;
and get a discount because I referred you:
LLP agreement packages start from RM 1,200.

Caution: When I went to LHDN Petaling Jaya, they said it’d take 3 working days, and in addition to LLP certificate and LLP agreement — they also needed IC copies of all the partners. That sucked, as I didn’t have the IC copies with me.

Pro Tip: So I went to LHDN Jalan Duta instead. And got it done within 15 minutes. (No IC copies required.)

Once you’ve registered your tax file, LHDN will issue you a letter which tells you your “No. Cukai Pendapatan” (Income Tax Number). It should look like this:

PT xxxxx xxxxx (10 digit number)

With your Income Tax Number, you can now do the next step: which is to file your LLP’s Income Tax Estimate:

Since this is your first year in business, you have 90 days to submit your income tax estimate.

For some reason, you can only submit Form CP204 (for LLPs) to the LHDN Branch in Bangi (by post/hand). Still waiting for their online system to be ready!

Pro Tip: If you’re an SME (less than RM 2.5 million paid-up capital, and not related to a company > RM 2.5 million capital), you don’t need to fill up the tax estimate portion for the first 2 years. As in, you fill submit Form CP204 anyway, but leave sections 2 and 6 blank.

4. Employer’s File & Employer’s Return Form

Here’s where it got a bit confusing for me. Since I have no employees, I thought I could skip this step. But apparently LHDN wants all LLPs to still register for an Employer’s File, and submit Employer’s Return Forms (Borang E) every year.

How to register your LLP for an Employer’s File (Fail Majikan)? You’ll need to head to a nearby LHDN branch and submit this form. (Remember to bring copies of your LLP certificate and ID too.)

For Employer’s Return Forms, it depends on when you start your business. You’ll always have to submit Borang E by 31st March of the following year. For example:

If you start in November 2016, you’ll need to submit Borang E to LHDN by 31st March 2017.

But if you start in January 2017, you’ll need to submit Borang E to LHDN by 31st March 2018.

Hint: Learning about financial statements will serve you well for a long time…

5. Annual Declaration

If you’ve made it to this point, you’ve already been running a (hopefully) successful business for some point now. It’s time to do your first annual declaration to SSM.

Your first annual declaration needs to be done within 18 months from your LLP’s registration date.

For subsequent years, it needs to be done within 90 days from the end of your LLP’s financial year.

This allows you the flexibility to choose a financial year that makes sense. So for example, if your LLP was registered on 12th July 2017, here’s an example of a financial year that doesn’t make sense:

When to submit? Within 7 months from the end of your accounting period. For example, if your accounting period is 1st Jan to 31st Dec (like in previous section), you need to submit your tax declaration by end July. If your accounting period is 1st July to 30th June, you need to submit your tax declaration by end February.

How to submit? For LLPs, tax submission is a fully manual process. Online tax submission for LLPs is not possible for now.

What to submit? Form PT 20xx. For reference, here’s Form PT 2016 in Bahasa and English. (The English form is for reference only.) You need to submit the Bahasa Malaysia version of the form to LHDN.

And just to demonstrate how this looks, here’s an example for an LLP whose financial year is from 1st January to 31st December for next year:

Could this be you? Why not start your own business today?

How Can I Get More Information?

LHDN has a pretty good website, where you can download all the forms necessary, and read official documentation regarding tax.

SSM‘s website is pretty good too, though not as well-maintained as LHDN’s one. But the reporting requirements for LLPs are simple — so you probably only have to deal with SSM once every year.

If you have any other burning questions, comment below and I’ll try to answer asap. Plus, some of my beloved readers sometimes help answer questions too. Thanks guys!

Finally, if you’ve made it this far, you either work for SSM/LHDN, you’re writing a thesis on LLPs in Malaysia, or you’re genuinely interested in starting a DIY business.

Whichever it is, I wish you the best — and hope you make tons of money.

– – –

Of course, if all the above sounds like a lot of boring, meaningless work — you can always pay someone to do it for you. Reach out to my partner here, or email info@axecute-consultancy.com for a quote; and get a discount just because you know mr-stingy. LLP packages start from RM 1,200.

So… we went to LHDN Bangi yesterday to submit our CP204 and took the opportunity to ask some questions (since we usually cant get a straight answer from anyone). The person at the counter connected us to a pegawai in charge through the phone and to our surprise, she said that for LLPs, the SME category does not apply. SMEs only apply to Sdn Bhds. Meaning we still have to submit our tax estimates with sections 2 and 6 filled up. This obviously doesn’t make sense to us since there’s no need to submit the PT form for the first 2 years right?

I just opened a PLT in August 2017. Now I’m trying to open a bank account. Went to Bank Islam and there a lot of documents I have to prepare. The manager of the bank told me it will take about a month or so to approve as it will involve getting some kind of info from SSM by the bank (as a counter-check measure). The Bank Islam branch I approached told me, so far only 2 PLTs have opened a bank account with them (for that particular branch) because without proper documentation, it will be rejected. The documents needed to open an account with them is as follows:

* MyKAD of compliance officer and partner(s) – no issue here
* Extract of Minutes of LLP Meeting(s) – huh? never did any official meetings.. All meetings have been over teh tarik
* Resolution of Limited Liability Partnership – the only resolution I know is my monitor. Its 1920×1080.
* Business Information (original and photocopy) – no issue here.. but as mentioned in ur article, it has to be purchased separately
* Information of current partner(s) (original and photocopy) – also no issue. can be purchased separately
* Registration Certificate issued by Registrar of Limited Liability Partnership (original and photocopy) – see above. need to be purchased.
* Latest Annual Declaration – just opened business.. declare what??
* Limited Liability Partnership Agreement – although i understand this should be officially done by a lawyer, having a template should save money and time.
* Annual Practicing Certificate / Annual Certificate of Registration issued by the Registrar of the profession’s governing body eg. if local LLP is a frim of professionals governed by specific legislation
* All documents must be Certified True and Accurate by the Compliance Officer of the LLP
* SSM Search (ROB) which is printed by the bank

The question is? Are all Banks required such an extensive amount of documents before a bank account can be opened? Is there a bank which requires only a minimum amount of documents?

For the LLP, since you mentioned about separate entity, that means you can acquire Shares, Vehicles, and property under LLP’s capacity, similar to Sdn Bhd i suppose? In your example will be Mr Stingy PLT’s name to buy these assets and any other loans. Is that right?

Hey Aaron! I keep coming back here for updates and references… haha! Wanted to ask if you knew of any insurance companies that are able to register LLPs for corporate plans. I’m trying to buy one for my employee but GE has told me that they only accept Sdn Bhds. Checking with some agent friends too.

Thanks a lot and it is an superb guide and a lot friendly compared to SSM’s guide. By the way, do you have any experience in registering LLP with Ministry of Finance? Please share if you have any. Cheers

This is the best writeup I’ve ever seen on Malaysia LLP. Thank you so so much for writing this up and sharing with us. You’re awesome! Thanks to you, I now know that Malaysia has LLP structures.

I’m pretty new to this and have a quick question. This is about fund/capital raising for a LLP. Apparently, you are allowed to issue debentures, raise capital or create charges over the LLP’s assets. This is according to a technical consultative document published by SSM found here (pg 39, Section 67): http://www.maicsa.org.my/download/technical/technical_clr_partnership.pdf

May I know how true is that? From my limited understanding and reading of the LLP Act 2012, the issue of capital raising was not addressed in the Act. Would you mind clarifying?

Thanks for your kind words. Hmmm… I agree with you — I don’t recall seeing any issue of capital raising in the LLP Act 2012; and am in no position to give a good answer on that. Perhaps a written query to SSM might help clear things up? Thanks!

Very good write up for young entrepreneur like myself who have no idea how to set up a partnership. Before this, I visited SSM and learnt about LLP but there’s isn’t as much info given other than the website write up. This article should be featured in SSM guideline.

Hello Mister. I would like to ask the following:-
1) If an LLP company is paying mileage e.g. 0.6/km for the business trip , does this need to be specify in the business/partner agreement?
2) Nowadays with the use of Touch&Go for parking and toll charges, there is no receipt issued, can the amount still be claimed?
Thanks.

Hi,
Can I know if I register for LLP (i’m solopreneur), and you mentioned 2 partners needed – can I be one of the partners?

Currently, I do tax filing under my sole proprietor business and done by my accountant. For LLP filing, can I continue to use the service of accountant to submit on my behalf, or do I need to submit on my own?

Distribution of profits to partners
LLP can distribute profits to its partners. Paragraph 12C of Schedule 6 of the
ITA provides that profits paid, credited or distributed to partners in the LLP
are exempt from tax. There is no withholding tax on profits paid, credited or
distributed to the partners.

Does this mean that after deducting the expenses, whatever profit that we distributes to the partner are exempted from tax? eg. the partner gets 10K from profit sharing, he doesn’t need to declare in his borang B?or is it exempted from the company tax?

Thanks for the great write up again. I have three questions:
1. If I don’t use a tax agent, do I leave Bahagian H empty or do I put my name & signature in there?
2. I’ve just learnt about the employee file, I too have no employees. Did they reject your PT form when you tried to submit with empty employer no?
3. Do you submit practically empty E return form every year? (since you said you have no employees)

Good write up. I missed the registration with LHDN part. Luckily not penalised.

QUOTE “If you’re an SME (less than RM 2.5 million paid-up capital, and not related to a company > RM 2.5 million capital), you don’t need to fill up the tax estimate portion for the first 2 years” UNQUOTE

if my company is not SME because it doesn’t fall under the MOF definition of SME, does it mean that I still don’t have to submit the tax estimate. I have clarified this with Kluang branch, and they said not required. However, I`m not convinced.

On a different note, do we need to submit tax declaration to LHDN? I thought one of the benefit of LLP is that we don’t have to have Audited account. What if my accounting is wrong and I submit them submit tax wrongly?

Hi,
I don’t understand the remuneration part which is taxable if not declared in the LLP Agreement.
Supposed I am the partner and also the employee that draws salary because I am working, how does it become non taxable if i declare it in the LLP Agreement?
Care to elaborate more?
Thanks!

If your LLP is paying the partners/employees salary, it must be declared in the LLP Agreement.
If it is not declared in the LLP Agreement, then you do not get to deduct this remuneration/salary as part of the costs of running the LLP.

Isn’t Form B an income tax return form? I think you’re comparing apples to oranges here. Anyways, if the partner of the LLP is receiving salary, then the LLP should issue EA form to the partner.

I’ve not considered the new form of the Sdn. Bhd. As far as I understand, all the requirements are still the same — only that you don’t need two directors now. That makes me think an LLP is still superior if it’s a simple micro-business.